Price cannibalization threatens PV growth

12/10/2021
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Price cannibalization threatens PV growth

As solar deployment increases, concerns about price cannibalization continue to be more and more relevant. Large-scale solar generation during midday hours may result in curtailment or unprofitable wholesale power prices. As supply increases, the economic viability of solar PV projects could fall into question.

Significant market price fluctuations and risks will threaten investor appetite, potentially hurting the long-term large-scale deployment of solar power. This has already been seen in California, with Karen Edson’s notorious 2012 “duck curve” showing the disconnect between generation and demand. Already, increases in renewable energy penetration in the state, as high as 26% of the energy market, have resulted in returns lowered by around 30%.

Jenny Chase, head of solar at BloombergNEF, believes this is a significant issue for every market seeing rapid solar penetration, and a threat to a subsidy-free solar future. “Large-scale solar generation depresses power prices, which can hit zero or even negative points during sunny periods,” said Chase. “This is not an imaginary problem, and it’s not a market design problem – the only way to solve this is to shift demand.”

Michele Scolaro, senior analyst at Aurora Energy Research, agrees that price cannibalization is a risk for developers of subsidy-free solar projects. “Due to its nature, price cannibalization has first hit the markets where the business case for merchant projects was stronger, as the penetration of solar PV increased and eroded the revenues captured by the assets,” Scolaro told pv magazine.

As solar deployment increases, concerns about price cannibalization continue to be more and more relevant. Large-scale solar generation during midday hours may result in curtailment or unprofitable wholesale power prices. As supply increases, the economic viability of solar PV projects could fall into question.

Significant market price fluctuations and risks will threaten investor appetite, potentially hurting the long-term large-scale deployment of solar power. This has already been seen in California, with Karen Edson’s notorious 2012 “duck curve” showing the disconnect between generation and demand. Already, increases in renewable energy penetration in the state, as high as 26% of the energy market, have resulted in returns lowered by around 30%.

Jenny Chase, head of solar at BloombergNEF, believes this is a significant issue for every market seeing rapid solar penetration, and a threat to a subsidy-free solar future. “Large-scale solar generation depresses power prices, which can hit zero or even negative points during sunny periods,” said Chase. “This is not an imaginary problem, and it’s not a market design problem – the only way to solve this is to shift demand.”

Michele Scolaro, senior analyst at Aurora Energy Research, agrees that price cannibalization is a risk for developers of subsidy-free solar projects. “Due to its nature, price cannibalization has first hit the markets where the business case for merchant projects was stronger, as the penetration of solar PV increased and eroded the revenues captured by the assets,” Scolaro told pv magazine.

Part of the article excerpted from the network, infringement contact deleted.

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